Cayman Islands: Why The Cayman Islands Have Staying Power

The positive contribution of offshore financial centres sometime gets lost in the debate about regulation and transparency, but it is important to recall why centres like the Cayman Islands exist in the first place, suggests Paul Byles, Director at Caledonian Global Financial Services

The only thing more prominent than the proliferation of global tax and regulatory initiatives is the question regarding the future sustainability of offshore financial services centres.

At first glance it seems a reasonable question: after mounting pressure from the OECD and major overhauls of their regulatory and cross border cooperation frameworks, coupled with numerous regulatory reviews (and the occasional blacklist), it should come as no surprise that these financial services centres might buckle under the pressure.

This potential buckling comes in one of two forms: either clients of jurisdictions such as the Cayman Islands will become frustrated with the increasingly and disproportionately burdensome requirements simply to do business, or the jurisdictions themselves will eventually find that the cost of supporting these new regulatory frameworks is just too high to remain globally competitive in the financial services arena.

The experience of the Cayman Islands demonstrates that the reality is very different, which gives much cause for optimism for the world of offshore financial services. Whether it's adding value to the wealth management objectives of high-net-worth families or creating corporate efficiencies for multinationals, the Cayman Islands continues to lead the way. This experience has been persistent despite the millions spent enhancing regulatory frameworks and accommodating the umpteenth international review of its legal and regulatory infrastructure.

Yet the story of the Cayman Islands' experience is not simply one of persistence; rather, the success lies in the actual contribution that the jurisdiction adds to the world economy. Let's look at the value added a bit more closely.

Local benefits

The Cayman Islands is one of the top 10 international financial centres in the world, with over 40 of the top 50 major international banks holding licences there. Over 80 percent of more than $1trn in deposits booked through the Cayman Islands represents inter-bank bookings between onshore banks and their Cayman Islands branches or subsidiaries. The offshore bank product continues to thrive and evolve due to worldwide recognition of the quality of Cayman's industry, as well as the intrinsic benefits of the absence of capital gains tax, taxes on bank transfers and no exchange controls. These banking groups can also utilise their Cayman-based branches or subsidiaries to issue international debt as it is easier and more economical for banks to issue bonds, CDs, TDs, etc. which are then sold to investors.

It is also important to remember that the aforementioned benefits can have a direct positive influence on consumers based onshore, because the capital raised may be utilised to decrease the cost of funding to these banks, thereby enabling lower interest to be charged to its onshore customers.

Private banking, too, has its traditional benefits, insofar as wealth management can be handled by offshore experts to improve succession planning while preserving or maximising capital for high-net-worth individuals. While the issue of legitimate financial privacy is not normally at the forefront of the current debates on transparency, most stakeholders including government officials, banks and of course the clients themselves still recognise that privacy has a key role to play. Moreover, this privacy value can co-exist alongside the various due diligence and transparency requirements for the vast majority of clients who are carrying out business legally.

Captive insurance

The Cayman Islands is the leading jurisdiction for healthcare captives, representing 34 percent of all captives, and to date approximately 90 percent of this is focused largely within the North American market. Cayman's insurance industry has been resilient in a very challenging market environment. To put this in perspective, in 2012 Cayman received the highest number of captives licences since the brutal downturn of the 2004 market. Today, the Cayman captive sector continues to show positive growth, with premiums at $11.83bn and total assets at $88bn, compared to $11.80bn and $69.2bn (a 27 percent increase) last year.

Fundamentally, captive insurance companies afford, for example, hospital networks in the United States the option of setting up their own captive insurance company in the Cayman Islands. One of the benefits of using the Cayman captive structure is that it offers flexibility to the client. This helps to address certain difficulties onshore clients may endure when attempting to secure insurance coverage via commercial insurance companies or when they simply cannot access intended coverage in a cost effective manner.

For years now, the Cayman captive product has been the facility through which many US-based medical groups have gained access to insurance coverage at reasonable rates. The cost savings benefit to related hospitals can be passed on to patients, and in some cases those hospitals may even gain new types of coverage which they may not have otherwise had access to.

Hedge funds

The international markets know very well that Cayman is the global leading hedge funds domicile. What is less known is how these funds use the Cayman Islands by adding value within onshore economies. The Cayman Islands has, in fact, facilitated hundreds of billions of dollars of investment into OECD economies such as the US using offshore hedge funds. Cayman funds provide a tax-neutral platform for international investors, enabling them to participate from several countries under a mutual investment purpose.

In many cases, the funds invested support projects based in economies such as the US. It is, therefore, somewhat ironic that the debate on the impact of offshore financial centres focuses on the issue of capital outflows when in actuality this capital, which often originates outside the US, ends up onshore benefiting the US and other OECD based economies via increased employment opportunities resulting from those investments.

So whether it's the role of its banking, insurance, trusts, or investments services, the Cayman Islands continues to offer positive value to the global economy. And this seems set to continue for the foreseeable future. Clients and other users of the services offered in the Cayman Islands can rest assured that this jurisdiction will likely remain a major player in the offshore financial service arena, precisely because it continues to uphold a high calibre of international expertise, continues to add value, in spite of regulatory developments.

While no one can predict the future of the offshore world, it is fair to surmise that the Cayman Islands have effectively demonstrated their staying power as one of the leading financial services centres. That the jurisdiction is able to continue to deliver these services to its clients and service providers alike in the context of the various global developments over the past decade or so is, in itself, a remarkable success story, and one that is rarely told.

Originally published in World Finance

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions